Chapter 2
Types of Business
Organizations
Forms of Business Entities
There are four main forms of businesses:
• Sole trader (proprietorship) where one person or a single
family owns and operates the firm.
• Partnership with two or more persons owning and
operating the firm.
• Corporation (limited liability company) where two or
more persons (called shareholders) own the business
but a board of directors manages its daily affairs.
• Cooperatives where its members own a non-profit
organization primarily for the benefit of members
Basic Financial Statements
All business types must produce four
basic financial statements:
• Trading Account
Collectively called
• Profit and Loss Account Income Statement
• Balance Sheet
• Cash Flow Statement
IMPACT OF TECHNOLOGY
• These financial statements, and all accounting
information, are often supported by computer
technology.
• Whilst computers assist in the accounting process,
they do not replace existing accounting principles.
IMPACT OF TECHNOLOGY
Computer technology, when efficiently applied,
will provide greater:
• Control
• Accuracy
• Storage
• Speed
Remember CASS
IMPACT OF TECHNOLOGY
There are also disadvantages of using computers
in accounting. These include:
• high cost incurred for acquisition and set up
• costly to retrain staff
• increased labour cost due to higher entry level skills
• upgrade and maintenance costs
• costs of all security measures to prevent unauthorized
users
• system failure can lead to loss of information and
delays in operations
MEASURES TO PREVENT
UNAUTHORISED ACCESS
• Implement security systems, for example, passwords or
encryption codes.
• Install software (anti viruses) programmes in order to deter
viruses such as Trojan.
• Create back-up systems in case there is a power outage or loss
of data (on a hard copy on a venue off-site or on a flash drive).